Bringing home back-office bank jobs won't fix labour tensions: analysts

Singapore

WITH unemployment set to rise amid Singapore's deepening recession, there have been calls of late to bring home back-office jobs in the banking industry that have been offshored to countries with lower labour costs and abundant manpower.

In a forum letter in The Straits Times, a retired ex-banker wrote that offshoring is a "disconcerting" trend, resulting in a loss of "basic understanding and fundamental banking skills" among the younger generation. These roles would also provide greater value-add to the economy than food delivery and private-hire driving, he wrote.

But analysts told The Business Times that onshoring these jobs - which consist of operational or support functions such as settlements, IT and call centres - will just be a temporary fix that will not meet the long-term needs of the banks or Singapore's aspirations for high value-added jobs for its people.

As many as four in 10 jobs in a bank are estimated to be back-office roles, said David Leong, founder and managing director of HR firm PeopleWorldwide Consulting, depending on the extent of its operations here.

These jobs, which were earlier not sought after by the local workforce as they are dismissed as more menial, are unlikely to be retained once the economy recovers, they added. These jobs are also slowly being phased out or automated, with the acceleration of digital transformation and technology advancements.

Alex Douglas-Jones, director at Deloitte Consulting, South-east Asia, said the Covid-19 outbreak is showing that there are a wider variety of roles that can be performed remotely than previously imagined.

"Banks, like all industries, are always looking to improve customer relationships and reduce risk while providing services in the most optimised manner - where they see opportunities to build additional scale capability remotely, then this will continue," he said.

"However, the increasing focus on enhancing customer relationships, and building of specialised capabilities while increasing automation of traditionally offshored work, as well as a bright fintech scene will provide an extent of counterbalance to this."

As it is, offshoring has been taking place in the past few years as banks focus on cost optimisation and efficiency, said Lim Chai Leng, senior director, banking and financial services, Randstad Singapore.

"While such moves will impact the total headcount based in Singapore, financial institutions are also building their capabilities to create new and higher-value jobs, such as in risk management and in the middle office functions," she noted.

This practice is also not solely seen in Singapore, she pointed out. "International banks in Hong Kong have offshored their back office operations to other Asian countries, such as mainland China, India and the Philippines," she said.

Financial institutions are keeping their main sales, trading and other strategic roles in financial capitals such as London and Switzerland, while back-office and shared services operations are offshored to places such as Poland, she said.

A check across the major banks here showed mixed findings on back-office operations.

Singapore's largest bank, DBS, said it made a "conscious and strategic" decision to base all its back office operations in its Singapore headquarters. DBS's call centre and customer service capabilities are also based here.

The bank is also ensuring that these roles are not deemed as dead-end jobs for staff. With its investments in digitalisation, DBS said that productivity levels have gone up, with employees in these back-office roles now able to provide oversight and support for key markets in the DBS network. Singapore is a regional business processing hub for the treasury and markets business.

OCBC said that all its key business and support functions are established here, but did not disclose the extent of its back-office operations elsewhere. UOB said that the Singapore workforce has a comparative advantage in the fields of regulatory compliance, financial analysis and technology, without providing data on its back-office roles.

Maybank Singapore said that "almost all" of its back-office support is done in Singapore, complemented with a "small percentage" of work done outside as these work scopes serve regional business needs.

The Malaysia-headquartered bank added that Singapore also provides support to its regional operations on the back of its expertise in certain areas, even if absolute costs may be comparatively higher. Citibank Singapore, HSBC, Standard Chartered and CIMB declined to comment on their back-office operations.

HR firm PeopleWorldwide Consulting's David Leong said bringing these jobs back may not solve the issues at hand. "For offshored jobs to return to Singapore, they need reconfiguration of the flow and cost structures," he said. "Those who are currently jobless may be trained for these roles, but the issue is the pay gap...those jobs go overseas because there is a comparative cost differential and hence, savings."

To be sure, Anand Srinivasan, associate finance professor, National University of Singapore (NUS) Business School, said even if costs go up, they are unlikely to be large as back-office is not a big cost driver for banks.

The more pertinent question is whether there is demand for such jobs here in Singapore in better times.

While banking is generally one of the most sought-after industries by students here, back-office roles are generally not considered "foundational" for banking, he said. These roles are also not highly demanded.

"My recollection from my students was that these roles were never attractive, as even if the pay was good, the experience would not lead to fast promotions."

Mr Leong said while back-office roles can be "easily filled" by polytechnic graduates and mid-career workers during a crisis, it may not be a sustainable strategy due to a "structural mismatch".

"With joblessness high, any job is a good job," he told BT. "When Singapore's economy was at its peak, poly graduates from IT and Engineering did not take up jobs in those areas because many felt that those jobs are mechanical and boring."

With the crisis hitting economies hard, banks are likely under pressure to further cut costs. Analysts noted that this could result in further offshoring but this is also likely to be tempered with sentiment within Singapore to keep jobs.

Observers also do not agree that bringing back these jobs will give Singapore an edge as a financial hub.

Prof Srinivasan said the argument can be made for a lot of industries and job descriptions. "Except in the defence sector, it's hard for a country like Singapore to maintain an available talent pool for all sets of jobs."

Observers said it is not back-office roles Singapore ought to focus on, but high-level management jobs. These higher-value-added jobs may be smaller in number, but are more critical for Singapore to keep up its lead as a financial centre.

Currently, Singapore citizens account for about 70 per cent of senior management roles in retail banks' local functions, the Monetary Authority of Singapore disclosed in August. Across the entire sector, which would include international wholesale banks, 43 per cent of senior roles are held by Singaporeans.

Mr Leong said he hopes local banks can start developing local talents for managerial and mission-critical roles so that Singapore's banking and finance industry can have critical mass and management bench-strength. "Building on the C-suite and senior management roles in Singapore is strategic."